P & G Case Analysis

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Current Strategy: While P&G is still a well-diversified company it used to be much more so. In 2011 while A.G. Lafley was CEO the company had 300 different brands. The company has since shifted their strategy and narrowed down their product lines substantially.
While speaking for an Earnings Conference Call on August 1, 2014, Lafley announced that the company was going to divest 90 to 100 “under-performing and non-core brands.” Today, that original 300 number has been reduced to just 10 product categories and 65 brands. This is significant because the top 70 brands owned by P&G at the time of Lafley’s announcement accounted for over 90% of the company’s revenues and 95% of net profit. This move was made for a few reasons. One reason
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Of top priority is value creation which allows the company to become simpler, more profitable, and faster growing. These changes come to life as the company implements new strategies and takes advantage of its capabilities that are always improving.
In order to remain competitive all companies are required to innovate. In the years 2014, 2015, and 2016 P&G spent $1.9, $2.0, and $1.9 billion respectively on research and development which allows the company to develop technologies and obtain patents.
Of equal importance is the need to continually reduce costs and improve efficiency. These productivity improvements are also a significant part of P&G’s strategy. While R&D expenditures have remained the same over the last 3 years, SG&A expenses have decreased from $7.9 billion in 2014 to $7.2 billion in 2016. Capital expenditures also decreased from $3.7 billion in 2015 to $3.3 billion in
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Lafley listed more reasons for consolidation than the ones mentioned earlier. He said that the consolidation would improve clarity, focus, prioritization, and simplicity while also creating a more agile, responsive, flexible, and faster company. The 65 brands that P&G decided to keep are powerful brands so there is no surprise as to why they kept them. For example, Tide represents just one brand of detergent but it is commonly used to refer to the word detergent in general. Creating powerful brands that become household names is a competitive advantage that the company has enjoyed for years. Procter & Gamble also enjoys the benefits of a cost leadership strategy as well. The sheer size of the company gives them an advantage when it comes to bargaining power. Because of the volume of product they produce they have the luxury of being able to control the prices they get from some customers. P&G also benefits from economies of scale because of the amount of raw materials they purchase to manufacture their

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